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revenue from the exploitation of its hydrocarbon resources. Because Bolivia is immensely rich in terms of its endowment in hydrocarbons, especially natural gas, the sustainability of
any scheme will depend also on the future evolution of the social and political pact that is behind the increase in expenditure on social protection. That evolution is very complex and
difficult to predict, especially in a country that throughout its history has shown a high degree of political instability.
In contrast to other countries that have been similarly favoured with an optimal endowment in natural resource for extraction and commercial exploitation, Bolivia seems to be making
a sustained effort to expand its fiscal space by other means, such as regular tax revenue, without having regard exclusively to its hydrocarbon wealth. This is a promising sign in
terms of ensuring the sustainability of fiscal space already capitalized.
3.7. Impact of new social investment in Bolivia
In the case of Bolivia, in addition to the sustainability of fiscal space created through taxes on the exploitation of natural resources, it is possible to evaluate the creation of fiscal
space from the standpoint of the quality of new social spending, especially in terms of its impact on development goals.
Several studies have documented the countrys recent achievements in terms of investment growth and poverty reduction and, in general, in attaining the MDGs. A prospective
quantitative study carried out by Valdivia and Montenegro 2009 argues that since 2006 the growth rate of public investment has increased, including a 3 per cent rise in social
investment and another 3 per cent in investment in the productive sector. The same author states that the transfers made through the Renta dignidad and the allowances paid through
the Bono Juancito Pinto and Bono Juana Azurduy have had an intergenerational effect on the level of welfare of Bolivian society: ...the main effect of this fiscal shock is increasing
the level of welfare of people with fewer resources, as well as an increase in GDP of 1.1 per cent over its natural trend Valdivia and Montenegro, 2009.
In Bolivia improvements have been documented in access to education and maternal and child health, thanks to monetary incentive programmes. Regarding school attendance
benefits, Pardo 2010 mentions that the rate of school attendance in Bolivia for the 6-11 year age group increased by 2.6 percentage points between 2006 and 2007. It is further
estimated that, on average, families in urban areas which have children in primary school spent around Bs. 375 approximately US55 on education each year and that the
education benefit can cover 53 per cent of family spending on education in urban areas and more than 100 per cent in rural areas. Increases in school enrolment have been also
documented.
Regarding the impact of the Renta dignidad, it is estimated that in 2008 almost 7 per cent of the population and 20 per cent of all households benefited from the programme, which
contributed about 9.4 per cent of the monthly household income and thus had a significant impact on domestic consumer demand Pardo, 2010.
As to the impact on poverty, Pardo 2010 estimated that, as a result of conditional cash transfer programmes, extreme poverty would be reduced by 14.6 percentage points
between 2007 and 2015 and that on the contrary, if benefits from these programmes were not granted, then the percentage of people living in extreme poverty in 2008 would be 39.8
per cent higher.
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3.8. Lessons learnt
Lesson 1
It is feasible to renegotiate the terms of the distribution of wealth generated by the exploitation of natural resources
. Developing countries favoured by natural resource endowments have an obvious advantage in terms of their ability to finance public spending
and social investment, especially for development purposes. However, judging from the historical experience of Bolivia, a country which over the past 500 years has gone through
several cycles of massive exploitation of its non-renewable natural resource base silver, guano, rubber, tin and hydrocarbons, it does not seem an easy goal to achieve, especially
in terms of political economy. The case of Bolivia shows that it is feasible, politically and economically, to renegotiate the conditions of the distribution of profits from the
exploitation of natural resources in order to obtain more balanced and fair terms for the country. In Bolivia this renegotiation was radical, and by its positive impact on the creation
of fiscal space it represents a strategic step towards sustainable development and economic growth.
Lesson 2
State revenue from the exploitation of natural resources can account for a significant proportion of investment for development.
Bolivias revenue from the exportation of hydrocarbon products accounts for about 40 per cent of total tax revenues and for 10 per
cent of GDP. This is highly significant, because these “fresh” sources are equivalent to more than two-thirds of Bolivias total expenditure on the social sector. Over the last two
decades the cost of social protection increased considerably, but it was greatly exceeded by the increase in taxes on revenue from hydrocarbons.
Lesson 3
Non-contributory social protection benefits are a viable option for achieving universal coverage in countries with a large informal economy.
The example of Bolivia shows that, while the possibility of extending traditional social insurance may be limited
mainly because of the predominance of the informal economy over the formal economy, a non-contributory benefit scheme is a viable option for guaranteeing universal rights in
accordance with the approach of the Social Protection Floor promoted by the ILO. However, financing policies and other efforts to increase tax coverage in sectors of the
economy where this is practicable, as well as strategies for creating fiscal space by increasing social contributions and for strengthening social protection in the long term,
should on no account be overlooked.
Lesson 4
Investment in social protection pays
. Recent studies on the impact of increased social investment in Bolivia confirm the advantages of such a strategy for economic growth.
Bolivia offers clear evidence that the argument that investing in social protection competes with private investment is erroneous. Such an idea is a fallacy, because it is evident that
expenditure on social protection, regardless of its origin, is injected into the economy and becomes part of a circular flow of income. These injections of resources are useful to
support growth in spending in the short term and, by increasing human capital, contribute to macroeconomic stabilization in times of crisis. This, in turn, is a genuine source of
expansion of fiscal space.
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4. Botswana: Creating the basis for improved social protection
4.1. Country profile
Located in the southern part of Africa, Botswana is a parliamentary republic that became independent in 1966. The country is a landlocked nation that borders Namibia to the north
and west, South Africa to the south and south-east and Zimbabwe to the north-east. Botswana covers a total territory of 581,730 square kilometers and is the 47th largest
country in the world. Since Independence, the country has had free and democratic elections.
The total population was estimated at 1,978,000 million inhabitants in 2010, according to the United Nations population database United Nations-Population Division of the
Department of Economic and Social Affairs, 2010. The population growth rate peaked in 1978 when it reached 3.8 per cent, after which the annual rate started to decline, reaching a
low of 1.2 per cent in 2003 and 2004 figure 11. At the current rate, the population is projected to reach 2.7 million by 2050.
Figure 11. Botswana: Historical population growth rates, 1960-2008
Source: United Nations Population Division database, 2009.
Overall, the population of Botswana is young, with a median age of 21.7 years. The population pyramid figure 12 shows a strong predominance of the lower age groups. By
2010 one-third of the population was less than 14 years old and 75 per cent of the population was under 30 years of age. At the other end of the age scale, a mere 5.5 per cent
of the current population is 60 years old or older.
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Figure 12. Botswana: Population pyramid, 2010
150,000 100,000
50,000 50,000
100,000 150,000
0-4 5-9
10-14 15-19
20-24 25-29
30-34 35-39
40-44 45-49
50-54 55-59
60-64 65-69
70-74 75-79
80-84 85-89
90-94 95-99
100+
Female Male
Source: US Census Bureau, 2010.
Practically all the key demographic indicators have shown a downward trend over the last three decades. The total fertility rate declined from 3.8 births per woman in 1995 to an
expected 2.5 births per woman in 2010, while the crude birth rate fell from 30 to 23 births per 1,000 habitants during the same period.
In economic terms Botswana produces 22 per cent of the worlds diamonds and is the most important producer of this mineral. Since the countrys independence the economy has
been driven by diamond exports, and this is perhaps the key element in understanding Botswana’s economic performance since then.
Between 1966 and 2005 Botswana was the fastest growing economy in the world, with an average annual economic growth rate of 9 per cent. Between 1966 and 1990 the mean
growth rate was even higher 13 per cent, though the 10-year average growth decelerated after 1980, from 11.5 per cent in the 1980s to 5.1 per cent in the 1990s and to 4.7 per cent
in the 2000s figure 13. The impressive performance of its economy allowed the country to multiply its per capita GDP by a factor of 50 between 1970 and 2008; despite the
reduced growth rate in the 2000s, the per capita GDP doubled.
